Market Commentary

Global markets rocked and rolled in January, with plenty to keep investors on their toes. US President Donald Trump hit the ground running following his tech-bro heavy inauguration, while Chinese developments in the AI space spooked Silicon Valley and all those with a stake in the artificial brain race (notably: Nvidia).

US stocks held up overall as a solid corporate earnings season and signs of softening core inflation buoyed spirits. However, this belied some sharp intra-month dips. Tech stocks came under particular pressure when little-known Chinese firm DeepSeek released a cutting-edge AI model, apparently developed at a fraction of the cost of its US counterparts.

Meanwhile, the Federal Reserve kept rates on hold and seemed in no rush to wield the axe again amid a sturdy jobs market and resilient broader economy. President Trump had the last word, unsettling markets at the end of the month by announcing tariffs of 25% on Canadian and Mexican imports and 10% on Chinese goods.

Investors were less upbeat at home, particularly following news that NZ inflation increased 2.2% in the December 2024 quarter compared to a year ago, confounding expectations that it would fall to a multi-year low. A handful of market heavyweights were unsettled by wider events, with Infratil losing favour amid uncertainty about AI’s impact on data centre demand, while Fisher & Paykel Healthcare softened on US tariff talk.

It was a different story across the ditch, where the Australian market hit a record high during the month after unexpectedly soft inflation data sparked hopes that the RBA would kick off a round of rate cuts in February. This was despite an upside surprise on jobs growth, with more people employed than ever before. 

Against this backdrop, the S&P 500 finished January up 2.7%, while the tech-focused Nasdaq managed to hold on for a 1.6% gain. The NZX 50 underperformed its peers by a considerable margin, falling -0.9%, while the ASX 200 posted a decent 4.6% gain.

The UK’s FTSE 100 had a stellar new year, ending the month up by 6.1%, after inflation unexpectedly dipped in December for the first time in three months, raising the odds of another rate cut in February. This was particularly welcomed by investors after government borrowing costs had soared to a 16-year high and the pound dropped to a 14-month low in the wake of the Government’s controversial spending plans.

GBP and AUD / NZD exchange rate change from 31 December 2024 to 31 January 2025:

  GBP and AUD / NZD exchange rate change from 31 January 2024 to 31 January 2025: